PCE Data in Focus as Dollar Bulls Stay in Control

Key Takeaways:

* Hawkish Federal Reserve expectations continue to strengthen the US dollar as markets increasingly price in additional rate hikes.

*Rising Treasury yields and higher-for-longer interest rate expectations are reinforcing the dollar’s advantage over other major currencies.

*Gold remains under pressure as a stronger US dollar and elevated interest rates reduce the appeal of the non-yielding precious metal.

Market Summary:

The US dollar and gold markets are currently being driven by the same dominant macroeconomic theme: expectations that the Federal Reserve will maintain a hawkish stance for longer. Following the Fed’s June meeting under Chair Kevin Warsh, policymakers left interest rates unchanged at 3.50%–3.75% but signaled that further tightening remains possible if inflation stays persistent. This has prompted investors to increase expectations for at least one additional rate hike later this year, with major institutions such as Bank of America and Deutsche Bank revising their forecasts in favor of further policy tightening. Consequently, the US Dollar Index (DXY) has remained near the 101 level, its highest point in over a year, while Treasury yields have climbed, reinforcing the dollar’s yield advantage and supporting broad-based strength against major currencies.

The stronger US dollar and higher interest rate outlook have simultaneously created headwinds for gold. As a non-yielding asset, gold becomes less attractive when interest rates rise, while dollar appreciation makes bullion more expensive for holders of other currencies. As a result, gold prices have retreated toward the US$4,100–4,200 range as investors shift their focus from geopolitical risks to monetary policy and inflation expectations.

Although progress in US-Iran peace negotiations and easing tensions in the Middle East have reduced some safe-haven demand for both the dollar and gold, the impact has been more pronounced on the precious metal. Developments such as the 60-day waiver allowing certain Iranian oil exports and expectations of improving shipping conditions through the Strait of Hormuz have eased fears of prolonged supply disruptions and regional escalation. However, lingering uncertainty surrounding the durability of any agreement and conflicting statements from both Washington and Tehran continue to prevent a complete unwinding of geopolitical risk premiums.

Looking ahead, upcoming US economic data, particularly the Personal Consumption Expenditures (PCE) inflation report, will be a key catalyst for both markets. A stronger-than-expected inflation reading could reinforce expectations for additional Federal Reserve tightening, further supporting the US dollar while extending pressure on gold. Conversely, any signs of softer inflation or an unexpected deterioration in geopolitical conditions could temper dollar strength and provide renewed support for bullion. For now, the prevailing fundamental backdrop favors continued resilience in the US dollar and a cautious to bearish outlook for gold as markets price in a prolonged higher-for-longer interest rate environment.

Technical Analysis 

DXY, H4: 

The U.S. Dollar Index (DXY) remains firmly bullish after extending its breakout above the key 100.10 resistance level. Price continues to trade above both the ascending trendline and previous resistance zones, confirming a strong bullish structure characterized by higher highs and higher lows.

Recent price action shows DXY consolidating near the 101.00 area following a sharp rally from the 99.50 region. The successful breakout above 100.10 has now turned that level into immediate support, while the index continues to hold comfortably above the rising trendline. This suggests buyers remain in control despite some short-term consolidation.

Momentum indicators continue to support the bullish outlook. RSI is holding near 70, indicating strong upward momentum, although it is approaching overbought territory, which could limit the pace of further gains in the near term. Meanwhile, MACD remains in positive territory, with both the MACD and signal lines holding above the zero line. Although the histogram has started to flatten, bullish momentum remains intact overall.

Resistance Levels: 101.85, 102.50

Support Levels: 100.90, 100.10

GOLD, H4: 

Gold remains under bearish pressure with the price failing to hold above the 4,250 resistance level and continuing to trade below the broader descending trendline. Recent price action shows sellers successfully defending the 4,300–4,375 supply zone, resulting in another rejection and reinforcing the pattern of lower highs that has dominated since mid-May.

The recent rebound from the 4,100 support area appears to have lost momentum, with price now drifting back toward support after failing to sustain gains above the highlighted resistance zone. As long as gold remains below 4,250 and the descending trendline, the broader technical structure continues to favor the downside.

Momentum indicators also point to weakening bullish conviction. RSI has declined to around 38 and remains below the neutral 50 level, indicating that bearish momentum continues to outweigh buying pressure. Meanwhile, MACD remains in negative territory, with the MACD line below the signal line and the histogram hovering near the zero line after a bearish crossover, suggesting downside momentum is re-emerging following the recent corrective bounce.Overall, the short-term outlook remains bearish as gold continues to trade below key resistance levels and momentum indicators weaken. 

Resistance Levels: 4250.00, 4375.00

Support Levels: 4100.00, 3935.00